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Tips for Navigating Inflation as a Small Business Owner

Tips for Navigating Inflation as a Small Business Owner

May 20, 2024

Small business owners face many challenges, which may become even more significant during inflation. As inflation hit new highs in recent years, small business owners are being tested and challenged by high costs and high-interest rates that have caused some to close their doors. So, how can small business owners weather the storm of inflation? Here are a few tips to help you get through it.

1. Know Your Numbers

As a small business owner, you should know the numbers on your financial statements and balance sheets and understand your cash flow. You should also have budgets and projections basis for comparison and can help you identify any anomalies.

2. Optimize Your Goods and Services

When costs and interest rates are high, supply chain issues may occur. It’s vital to manage your goods and services to make a solid profit. Take the time to calculate the revenue and costs of each product and service you offer to determine their gross margin and net profit. Find any poor performers and consider eliminating them so you don't waste valuable time, material, and resources on products and services that yield little profit.1

3. Know How Inflation Might Impact Other Areas Outside Your Business

Inflation may affect your ability to borrow, lead to a business slowdown, and drastically affect your pricing models for your products and services. Understanding all the peripheral areas affected by inflation may make your business more resilient and better able to withstand the ups and downs.1

4. Know the Difference Between Strategic and Non-Strategic Spending and Cost-Cutting

In times of disruption, it’s easy for business owners to panic and begin cutting costs or spending without developing a plan to either lower company costs or outdo the competition. In either case, spending or cutting costs without following a strategy may lead to severe problems, especially during times of inflation. Always do your due diligence before implementing new spending or cost-cutting measures to ensure they align with the company's goals and needs.2

5. Automate if Possible

The more work you automate, the more efficiently you can run your business. Perform a time study of each operation in your business. If any operations take longer than they should, or if there would be a more time-saving way to automate them, see if the cost would be worth the time it would save. You may even want to look at your daily tasks to see if there are ways to automate some of your processes to free up time to develop more business for your company.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 553066


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